In the latest USPS cost cutting proposal, they are not going to deliver mail to the door for new construction developments, requiring residents to pick up from a central box. This will save the postal service $65-190 per year per delivery because it reduces their labor costs. This got me thinking about what has happened over the last couple of years and where things could go in the future. Let’s face it, the Postal Service is broke and lost $15.9 billion dollars last year and is on track to lose another $7 billion this year. To make matters worse, everyone knows that mail volumes are going to continue to decline as we all move to digital substitution. The question is what changes we could see for the future that will affect every one of us who still depend on the postal service to get our mail each day.
Recent Postal Changes
The best way to figure out what could happen is to look at the changes or proposals we have seen over the past couple of years. I am going to focus on the ones that have a direct negative impact to the consumer.
- Closing low revenue post offices
- Reducing hours and closing fewer post offices than expected
- Reducing processing facilities from 450 to less than 250
- Slowing First-Class Mail® from 1-3 day to 2-3 day delivery
- Eliminate Saturday Delivery without proper authority and getting turned down.
- Again proposing to Eliminate Saturday Delivery
- Annual Price Increases instead of every 2-4 years as we saw in the past.
- Expanding Centralized Delivery
The hardest part of all of these changes is the not knowing. The USPS proposes items but many times is not in control of the final outcome because it has to get through the different political branches or groups that make the final decisions. This causes delays, confusion and a feeling that nothing is getting accomplished. This then creates more negative news stories that get people thinking on how they could move away from mail faster than they were already planning.
Future Postal Changes
Here are my predictions an on what we will see with the USPS in the future. Please keep in mind that these are opinions and not based on any fact or inside information.
- Postal Reform – I believe that in the future we will all come to terms that the USPS needs to control their own destiny and make changes necessary to stay solvent.
- Saturday Delivery – This will go away because in studies, the majority of people said they could live without it.
- Price Increases – Right now pricing is tied to the consumer price index that increases in the 2-3% range per year. The USPS is allowed to exercise an Exigent Rate Increase under extreme circumstances. I believe that this will happen over the next couple of years. $.46 is still a really low rate to pay to mail a letter and is much less than other westernized countries. If we increased rates to $.55, I do not believe that peoples mailing habits would change dramatically and after the initial shock would become the new normal. Also, many classes of mail like Standard Mail® Flats and Periodicals are processed at a loss. I think this will go away and the pricing will increase to a place where the USPS can make money.
- Increased Contract Postal Units – These are private stores offering postal services. Why do we need the USPS to manage and staff every postal center? Why can’t Wal-Mart have post offices inside them? The downtown in many small communities has moved out to the shopping complexes. It is hard to hear and to say, but if that is where the people are, why shouldn’t they be run by private companies who can use it as a draw to their stores?
- Change in Mail Delivery Mix – The USPS will be known in the future for delivering mostly advertisements and packages. First-Class Mail® volumes will continue to decline as changes in technology increase the value proposition of getting the invoice or check electronically. Periodicals will be much more entertaining and interactive to read on a tablet. Peoples comfort levels with this technology are increasing at an incredibly rapid pace where people want the information accessed and stored in the cloud. All that we are left with is advertising content and packages where the USPS offers incredible value.
Conclusion
The only thing we can count on from the USPS is change and lots of negative news along the way. No one likes change and we all feel entitled to the way it used to be. The issue is that we the consumers caused this change. We are all signing up for electronic delivery and emailing instead of mailing. We are ok getting our magazines on our IPad or using UPS or FEDEX at work because they offer better discounted rates. We are all the ones using less postal services forcing them decrease service levels and increase rates to remain solvent. The key thing is we have to support their decisions and let them try their best to stay profitable so they can provide core services in which we all depend on.